tv First Business FOX December 11, 2012 4:00am-4:30am PST
a troubled tech stock is now turning heads on wall street. in today's cover story, michigan remains divided over union rights legislation. how one signature could affect millions. plus, from retail giant to bankrupt & broken - a look at the rise and fall of circut city. how top techniques used by wealthy americans turn into big deductions on taxes. and, ways companies are tracking smartphones to learn how to advertise to your children. first business starts now. you're watching first business: financial news, analysis, and today's investment ideas. good morning. it's tuesday, december 11th.i'm angela miles. in today's headlines... the market is still looking for progress on avoiding the fiscal cliff. president obama and congressmen boehner met at the white house yesterday. stocks inched higher on the news, with the dow and s&p 500 near 5-week highs. selling in apple once
again held back the nasdaq. gold was up and oil was down. a two-day fed meeting starts today with the fed most likely talking about stimulating the economy by purchasing more treasury bonds to keep interest rates low. the government is selling its remaining stake in aig... and reports say regulators have a $1.9 billion dollar settlement with hsbc. the bank is accussed of laundering money for drug dealers and terrorists. john brady of rj o'brien joins us now. john, are you seeing any special positioning ahead of the fed? > > we have angie. over the course of the last two weeks so, we have seen equity markets continue to "melt up," as traders would say, continue to be sort of supported by this idea that the federal reserve is going to continue its method of quantitative easing. the fed meeting to start today. however, we will receive the announcement from the fed tomorrow, perhaps around 1:00 or so wednesday. but, the idea is that risk assets, both equities
and metals, commodities mostly, continue to melt higher with the idea that the fed is going to continue to monetize its debt and supply excess reserves to the economy. > what about tax management? what are you seeing with investors and traders trying to avoid that fiscal cliff, although potentially that could happen next year? > > we have seen two big trades really, angie. first, last week gold came off about $50 an ounce. it was rumored that hedge funds specifically were exiting long positions ahead of year-end to meet both investor redemptions as well as a number of other tax-related issues. secondly, the corporate bond market has been very busy over the last couple of weeks. corporates are issuing debt at record low yields, turning around and using that capital to pay out special dividends to shareholders. costco and home depot have been two specific names that have used that capital structure, arbitrage, in order to reward shareholders ahead of year-end. we may see a bit more of it in the next few weeks. > good to have you on the show. that is john brady of rj o'brien. thanks. > > thank you. lawmakers in michigan are on
the verge of handing organized labor a defeat in a state where just 20 years ago more than one in four workers were union members. but that membership has since declined. our cover story looks at michigan, about to become a right-to-work state. both houses of michigan's legislature have passed bills that would prohibit employers in michigan from forcing workers to join or support a union as a condition of employment. after wording differences are reconciled, michigan's governor is expected to sign it into law. "one of the arguments for right-to-work is that it is 'friendly' for business, you get extensive business investment." but protestors such as nurses hope to discourage the governor from signing the legislation. "things that we have, such as adaquate staffing, rest between shifts, those kinds of things would be gone if we didn't have collective bargaining." the pending legislation comes as daimler announced it would make a $100 million investment to build heavy-duty trucks and other vehicles at the company's redford facility in suburban detroit. "you're seeing millions go into
this plant, so it disproves the argument." "i think it's a wonderful one- time deal. but we need more than one-time wonderful deals. we need a succession of them. capitalism is continuous." monday, president obama, who won re-election with united auto workers and other union support, toured the plant where daimler would build axles, transmissions and engines. he has opposed right-to-work legislation and was expected to meet with governor snyder. "what we shouldn't be doing is taking away your right to bargain for better wages and working conditions." what happens to auto workers if michigan becomes right-to-work? perhaps not much, according to the center for automotive research. the center's labor and industry group director says "in an already organized plant, they are used to paying dues. but i don't think there will be a mass exodus." if michigan becomes a right-to-
work state, it would be the 24th to do so. 3100 hundred jobs may stall out at a gm plant in germany. the u.s. automaker is out with plans to stop making its zafiras at its opel division in 2016. gm, however, is considering other options for the factory to stymie job losses. the carmaker is attempting to put the brakes on its losses in europe. the plant shutdown becomes the first for germany since world war ii. italian bond yields headed higher following news that prime minister mario monti plans to resign. monti's reign will come to an end in february, following passage of the 2013 budget. the move raises political concerns over italy in the midst of the eurozone crisis. monti has been credited with keeping italy's debt crisis under control. the japanese economy has some gross domestic problems. japan's gdp has contracted two quarters in a row, signaling it has entered recession. a recent territorial dispute with the chinese government and struggles following last year's tsunami
continue to hurt japan's export market. an election next week in japan could have a large effect on fiscal policy. reports say delta is close to landing a deal that will give the airline a 49% stake in virgin atlantic. bloomberg reports talks between delta and singapore airlines, which is looking to sell its stake in virgin, are advancing. the deal is estimated to cost between $300 and $500 million. it could mean a step up for delta's business, due to virgin atlantic's high volume of premium passengers. apple and google reportedly are forming a rather odd alliance. the two rivals are making a joint bid for a bundle of kodak patents. according to bloomberg news, the combined bid is $500 million. kodak could get an $830 million loan to get out of bankruptcy by selling its patents. holiday hiring is on track to set a record this year. retailers have added more than 619,000 jobs in the last two months, up 19% from last year. if 140,000 more people are hired this season it will break a
record set in 2000 of 760,000 hires - the most ever. stores are bulking up staffs to stay open longer. macy's just revealed last week it will remain open for 48 hours straight the weekend prior to christmas. apps on smart phones and ipads may be spying on your children. the federal trade commission found that most mobile apps for kids are secretly collecting information such as phone numbers, locations and other private information without parents' knowledge. the ftc study shows how interactive apps, purchased through the google apple stores, could share id information with advertising networks or other third parties that build profiles based on kids' behaviors. mcdonald's may be on the verge of a burger breakout. global same-store sales jumped 2.4% in november, well above analysts' expectations of .17%. the premium cheddar bacon onion sandwich, along with dollar
value menu items, appealed to recession-weary consumers still looking for good deals. one analyst predicts mcdonald's to start 2013 flat, but pick up mid-year. "at that point, we're going to see an acceleration because i think a lot of the current iniatitves they have of expanding, the emphasis on the dollar menu, and bringing in new products to market, i think that's going to have a positive impact on same-store sales." mcdonald's' stock rose nearly 1% on the news, to $89.35 a share. that bounce follows an october in which mcdonald's' u.s. sales slipped for the first time in nine years and led to the resignation of company president jan fields. hewett-packard is suddenly jumping onto the hot stock list. shares climbed 4% yesterday on speculation billionaire investor carl ichan is building a positon in the tech giant. this year has been a rough one for hpq. shares have tumbled on troubles including the $9 billion charge from its acqusition of autonomy and concerns about its printer and pc businesses. here's
trader alan knuckman's thoughts on the stock: "well, i think it might have ovedone on the downside. you have to remember hewlett-packard has done this twice. it dropped from $80 back down to $10 and then rose again; fell from $50 to the current level where we are now. so, it does have some brand value, it's just a matter of sorting out the company and making things work again, and i think the new ceo could do this." heweltt-packard stock is down nearly 75% since april 2010. at current levels, knuckman calls it a stock to buy now and hold for a year or two. barron's is naming its top 10 stock picks for 2013. apple, jp morgan chase and royal dutch shell all made it onto the influential list of picks, joined by barnes and noble, black rock, general dynamics, marathon petroleum, novartis, viacom and western digital. barron's has been bullish on several of these stocks this year while others were determied to be undervalued. it might just be the thing to
get the whole world focused on fighting global warming - pasta. ubiquitous in almost every culture, pasta is one of the foods most in danger from warming global temperatures. made from wheat, the grain is considered the most susceptible to higher temperatures, drought, and flooding, all conditions that science says will accompany a warmer planet. still to come, what could become of a few of your favorite things when looking for tax breaks this year. but first, find out why the plug was pulled on circut city. that's next with bill moller, after this "in the know" message.
w you remember circuit city? i mean, that business was big - starting out as a mom & pop for a number of years until the mid 90's, it was the best performing company on the fortune 500. 3 years ago it went bust. so, what happened after it was liquidated. let's talk with alan wurtzel. he is the son of the pop who founded the little tv & appliance store in 1949. as a 52-year insider, including a stint as ceo, he has now written the book, "good to great to gone: the 60-year rise and fall of circuit city." so mr. wurtzel, what did happen? > > well, it happened in four stages. between 1995 and 2000, best buy and world mart and the other mass merchants began catching up with us. we did not change our store format. and by the end of the decade, we were
number 3. my successors, nick's successor, understood there was a problem, but it would have required a huge investment in remodeling stores and retraining salespeople, etc. - changing the business strategy. he didn't have the fortitude, the courage, the vision, to make these hard changes. he was afraid that wall street wouldn't understand and the price of the stock would collapse. he became discouraged and quit, and put in as his successor somebody that didn't grow up in the business, came from best buy, brought in a whole new team of people, didn't understand the caring and respectful culture that circuit city had with its employes and suppliers. they fired 3400 salespeople and crowed to the newspapers how
much money they were saving, and in the process destroyed the morale and culture of the company. > let me ask you: this is a family business after all, and you are watching it before your eyes fall apart. do you retain some bitterness about this in any way? > > i wouldn't say bitterness, but obviously disappointment. > were you advising him? did you see early on that those were mistakes that were being made, because you were on the board i think until 2001. > > yes. i saw early on that we were losing ground to best buy, and that we needed to change the store formats. and i spoke up, but my voice didn't persuade the then-current ceo. > what is the lesson here do you think? you have to stay nimble? you have to stay productive and progressive? looking ahead? are those the lessons for companies? > > the big lesson for circuit city is you have to listen to the customer and see what the customer is doing. the customer was going to places like best buy and the mass merchants, where you could pick it up, put it in a shopping cart, wheel it to the checkout stand. we insisted on staying with the
old model, where you had to talk to a salesman so that he could step you up to a more expensive product or an extended service policy. > lessons learned. alan wurtzel, thank you so much. thank you bill. still ahead, how the wealthy are cutting down on what they pay in taxes. what it could do for your returns, next.
while oprah has a few of her "favorite things" to buy for christmas, we have a few of the favorite tax deductions of the wealthy. our tax man, david elyashar of horwich coleman and levin, joins us on set. good to have you back on the show. > > thanks for having me. > according to cnn money, gross earners, or taxpayers bringing in $250,000 on average, took deductions of $91,000 in 2010. congress is about to potentially limit those deductions to maybe down to $50,000. but that means for this year, you can still take some pretty decent deductions. true? > > correct. > let's talk about some of the top deductions for the wealthy, starting with state and local income taxes. > > state and local income taxes are nice for wealthier taxpayers, because of course
the more money you make, the more you are going to pay in state taxes. and depending on what state you live in, that could have an even more meaningful impact. for example, in illinois, we have gone from a 3% tax rate to a 5% tax rate. in many states that could be as high as 9% or 10%. > the wealthy also love a charitable deduction. > > that's right. for wealthy taxpayers, when they have more disposable income to make charitable contributions. and two, when you are in a higher tax bracket, that makes a more meaningful reduction in your tax burden. the nice thing about charitable deductions is if you are a wealthy taxpayer, you can contribute appreciated property to your favorite charity and get the deduction for the fair market value of that property. and not only that, but you can avoid- if for example you bought a stock many years ago and it has appreciated in value, you can avoid paying the capital gains tax on the appreciated stock. > another big one is a home
mortgage interest tax deduction. this could be great if you have a few homes perhaps. > > that's right, it's a nice deduction for the wealthy because wealthier taxpayers may have their main home, but they may also have a second home. and so you can deduct the mortgage interest on loans up to $1 million, and also up to $100,000 on a home equity line. so wealthier taxpayers are more inclined to take out loans of that size, and that will have a nice, meaningful impact on their tax return. > at the end of the day, these are deductions just about everybody should be taking though, correct? > > correct. everybody can take these deductions. and the deductions that we named today have a dollar-for-dollar impact on your income. so everybody should be on the lookout and taking these deductions on their tax return. > david elyashar, always a pleasure. thanks for coming on the show today. > > thanks for having me again. a tax strategy helped save google around $2 billion in 2011. recent filings show that google shifted $9.8 billion in revenue into a company in bermuda - a country that is free of corporate income tax. while legal in the u.s., the tax strategies have angered european officials, who argue that big companies including google and starbucks do not pay enough
we have located scott bauer of trading advantage to talk about a couple of stocks that might be in for major rallies, starting with garmin, which makes gps products, and gap, which happens to trade under the ticker gps. good to have you on the show. > > good segue angie. > i thought it was pretty cute. let's take a look at garmin first, which makes the gps. what do you see in the charts that you like here? > > after the announcement a couple weeks ago that it was being added to the s&p 500 index, as of the close yesterday, we saw a pretty good appreciation in the stock. all of these fund managers out there that track the s&p 500 and have their clients' money in funds in the s&p 500, they had to get into garmin. so, $42, which is really the level that it traded at up until yesterday, that is a pretty good resistance point. that is a pretty high point. i wouldn't be surprised if we saw it pull off just a bit, because now much of the
buying pressure is taken out of the stock. > interesting. and gap. what is going on there? > > you know, gap was the darling this whole entire year in the retail space, or one of them. we saw this stock really come out of nowhere, turn itself around, trade up into the high $30s, and then, just at the end of last week and yesterday, out of nowhere again, we saw this thing drop 15%, almost 20%. now, there are a couple of schools of thought there, because there is not a lot of concrete news out there. one is, much like people are saying what's happening to apple, investors are taking money off the table, they are taking their profits off the table that they have written up this year. two, later in the week on thursday, we are going to see the november retail sales report. and we are going to see, maybe gap is going to come in a little shy. who knows? and three, there are some stories out there that there is some disappointment from investors and in the marketplace that gap did not give their
shareholders any sort of special dividend. so maybe the combination of those three is why we are seeing the stock back off. but i think still in the long run, i think it has probably still got some room to run to the upside. > we love having you on the show. thanks as always. scott bauer of trading advantage. > > thanks angie. it's time for us be on our way for today. coming up tomorrow, a harvard- educated, mensa super model will be here with an insider's view on the modeling industry. from all of us at first business, thank you for watching.
. for the second time in three days, a pipe bomb was discovered in pleasant hill, what investigators hope can lead them to whoever is responsible. it's all ahead on the ktvu channel 2 morning news. this is ktvu channel 2 morning news. and good morning, it is december 11th, i am brian flores. it is almost 4:30 let's check in with steve. how is the day looking so far? >> i know it is dark. >> we have a little bit of a change here not only inland but